Wednesday, June 06, 2007 4:48 PM
Real Estate Glossary
Feel like agents and brokers are speaking a different language? Decode what they’re saying here.
“A” loan: Loan reserved for those with high credit scores, usually 660 or higher.
Adjustable rate mortgage (ARM): This is one of the two basic types of home mortgages. The interest rate varies over the course of the loan.
Appraisal: A professional estimate of a property’s value on the market.
Appraisal fee: The fee your lender charges to estimate the market value of a property, ensuring that the asking price for the house is not inflated. Usually a few hundred dollars.
Appreciation: An increase in a property’s value.
ARM (adjustable rate mortgage): This is one of the two basic types of home mortgages. The interest rate on these varies over the course of the loan.
Bidding war: A group of bids placed on rapid investment by multiple and potential buyers for a piece of property. Often associated with auction mentality, bidding wars are every seller's dream, since they usually result in a large number of bids and the highest selling price one can get.
Buyer’s agent: A real estate agent that represents the buyer, not the seller, in the sale of a property.
Buyer’s contract: This contract will obligate the buyer’s real estate agent to reveal all known pros and cons about the properties he/she shows you.
Cape Cods: Traditional, modest, one-story homes built by the Colonists to protect against the harsh New England weather. They had double-hung windows, shingles, a small overhang on the roof, and several large chimneys. But as the Cape Cod area grew in prosperity, so did the houses. This style is now replicated all over the country with larger homes, but is still characterized by a symmetrical design, a high perfectly pitched roof, and wooden shutters.
Cash reserve: A designated amount of money that some lenders require you to have in your bank account after closing.
Closing (aka settlement): The final transfer of the property from the seller to the buyer. The buyer signs the mortgage; the seller receives payment for the property; and closing costs are paid.
Closing costs: Expenses incurred by buyers and sellers in transferring ownership of a property. Varies depending on your loan agreement, but usually includes escrow fees, homeowner’s insurance, real estate agent fees, legal fees, prepaid loan interest, private mortgage insurance, property taxes, recording, courier and notary fees, and title insurance.
Condominium (aka condo): A building or complex in which units of property are individually owned but are overseen by one management company.
Contingency: A clause in closing documents that says certain conditions must be met before the contract is binding.
Co-op (aka cooperative): In a co-op, the affairs of the building are controlled by a board of managers usually made up of fellow owners, and this board must approve all sales and all expenditures of the monthly maintenance fees.
Counter offer: The amount the seller asks for the property after the buyer has made an initial offer.
Colonial: A boxy, symmetrical home arranged around a central front door.
Colonial Revival: An update on the traditional Colonial style, these homes often have clapboard siding and elegant central hallways.
Cottage: Small, single-story home -- similar to the Cape Cod style -- that is often found in the country.
Credit report: A complete listing of your credit history -- all bank accounts, credit cards, loans, etc.
Credit report fee: The fee lenders charge to check your credit report. Usually no more than $50.
Credit score (aka FICO score): A number that rates how likely you are to pay your bills on time, based on past credit history. This number is also used by lenders to determine whether you’re eligible for a loan and for what type.
Debt-to-income ratio: Measurement lenders use to determine how debt will affect your finances.
Deed (aka title): A document that proves ownership of a property.
Depreciation: A decrease in a property’s value.
Down payment: The amount of money you have to pay upfront to buy a home. It usually falls between 5 percent and 25 percent of the total cost of the house.
Eleventh hour squeeze: A lender’s or seller’s last-minute attempt to get you to make more concessions (usually in the form of moolah). This is why it’s important to read your closing docs at least 24 hours before signing them.
Equity: The overall value of a property, minus any debts against it.
Escape clause: A section in closing documents that requires the buyer to agree to certain changes within a set period of time, or else the contract becomes void.
Escrow: An arrangement in which money and deed are held by an objective third party until the closing.
Escrow fees: The charges you pay to cover the handling of your documents and funds. These will vary depending on your new home’s price.
FICO score: Also known as a credit score, FICO stands for Fair, Isaac & Co., who developed this, the best-known credit-score model in the United States. It’s a three-digit number between 300 and 850 that rates how likely you are to pay your bills on time, based on past credit history. This number is also used by lenders to determine whether you’re eligible for a loan and for what type.
Fixed rate mortgage (FRM): This is one of two basic types of home mortgages. The interest rate on a fixed rate mortgage stays the same over the course of the loan.
Flood insurance: Provides coverage for homes in case of flooding. Usually required if a property is in a flood zone.
For sale by owner (FSBO): Properties that aren’t listed for sale through a real estate company, but are available directly from the owner.
Foreclosure property: Property that is seized and sold by the lender when the owner fails to make mortgage payments.
FSBO (for sale by owner): Properties that aren’t listed for sale through a real estate company but are available directly from the owner.
GPM (graduated payment mortgage): A mortgage with low initial monthly payments that gradually increase over a specified amount of time. These plans are mostly geared toward young men and women who cannot afford large payments now, but can realistically expect to do better financially in the future (like medical residents).
HELOC (Home Equity Line of Credit): a second mortgage that carries an adjustable interest rate, which means it's susceptible to the Federal Reserve rate hikes.
Homeowners insurance: Insurance that, at minimum, covers the structure of your home, your belongings inside the home, and your living expenses in case you’re forced out of your home. It also offers liability protection if someone is hurt in your home.
Inspector: A professional who examines a home for stability, harmful substances, and necessary repairs prior to the final walk-through and closing.
Interest: Percentage rate tacked on to a sale price that the borrower must pay the bank in order to gradually pay off a loan.
Lender fees: These can vary, but usually include application fee, appraisal fee, and credit report fee.
List-sale price ratio: Percentage of difference between how much a property is listed for and how much it actually sells for. The closer the ratio is to 100 percent, the better for the seller.
Listing agreement: The contract between the seller and a real estate agent to sell a home.
Lock-in: A written promise that a borrower will get a certain interest rate.
Market value: How much a reasonable buyer would be willing to pay for a property. An appraisal is done to gauge this amount.
MLS (multiple listing service): An electronic database that gives real estate agents access to properties represented by all agencies, not just their own.
Mortgage: A loan that covers the purchase of your house after you’ve made the down payment. Usually requires monthly payment to pay down the loan interest and principal.
Mortgage insurance: Insurance that protects the lender in case the buyer can’t pay the mortgage payments.
Mortgagee: Party that grants the loan.
Mortgagor: Party that receives the loan.
Multiple listing service (MLS): An electronic database that gives real estate agents access to properties represented by all agencies, not just their own.
National credit repositories: Three nationwide credit agencies that will provide one free credit report to every person each year -- Equifax, Experian, and TransUnion.
Offer (aka purchase offer): The amount a buyer is willing to pay the seller for a property.
PMI (private mortgage insurance): When a buyer does not put 20 percent toward the down payment of a home, lenders will allow a smaller down payment, as long as the borrower pays for private mortgage insurance. This will require an initial premium payment of 1 percent to 5 percent of your mortgage amount, and may require an additional monthly fee, depending on the loan's structure.
Principal, interest, taxes, and insurance (PITI): The four most common components of a monthly mortgage payment with escrow.
Private mortgage insurance (PMI): When a buyer does not put 20 percent toward the down payment of a home, lenders will allow a smaller down payment, as long as the borrower pays for private mortgage insurance. This will require an initial premium payment of 1 percent to 5 percent of your mortgage amount, and may require an additional monthly fee, depending on the loan's structure.
Preclosing: Process of obtaining homeowner’s insurance, getting the cashier’s check for all of the closing fees, and doing a final walk-through of the home.
Prequalification (also known as preapproval): Meeting with different lenders before looking at houses to find out for what type of loan you’d be approved.
Points: An upfront interest payment that your lender may require you to pay for processing and approving your mortgage. You pay more upfront with points, but they can reduce your ongoing interest rate (which means a whole lot of money saved later on). One point is 1 percent of the amount of the mortgage.
Principal: The original loan amount borrowed, separate from the interest.
Property tax: A tax charged by local governments to cover various local costs (like road repairs).
Radon: A harmful gas that inspectors should check for during inspection.
Ranch: A single-story home that is often U- or L-shaped with a wide-open floor plan, attached garage, and patio.
Real estate agent: A person licensed to represent a buyer or a seller in a real estate transaction in exchange for commission.
Realtor: A real estate agent who is also a member of the National Association of Realtors.
Row house: One in a series of attached houses.
Seller’s agent: A real estate agent that represents the seller in the sale of a property. Most real estate agents are seller’s agents.
Settlement statement: A list of all the closing costs, which you should look over at least 24 hours before closing.
Split-level: Similar to a ranch, this style’s first floor is raised above an elevated basement to provide another level of living space. Quieter quarters are designed for sleeping, often over the attached garage.
Tax assessor: A person who calculates the taxable value of your property and applies all exemptions.
Title insurance: A policy that protects you in case the person that sold the house to you didn’t actually own it.
Tudor: A multilevel home usually made from brick, stone, or stucco. It usually has arched doorways, small multipaned windows, and large chimneys.
Underwriting: Evaluation process done by lenders to see how much risk is involved in giving a buyer a loan. Usually done in preparation for closing.
Walk-through: Last opportunity before the closing to go through the house and make sure the physical condition hasn’t changed.
Warranty deed: Document stating that the seller owns the house and has the right to sell it, and that there are no liens.